In the cotton market, dozens of remorseful buyers are putting that question to the test.

Since they agreed earlier this year to buy thousands of bales of cotton when prices were at record highs, cotton mills have seen prices tumble 54%. So, as delivery time nears and bills come due, some have decided not to pay up.

In a phenomenon that may be unique to the cotton market, contracts are considered by many buyers to be little more than a message of intent, with any agreement up for negotiation. And because the market is so farflung—merchants in the U.S. often trade with thousands of small buyers in Bangladesh or Indonesia—regular legal battles can be costly and lengthy.

Thanks to the wild swings in cotton prices, the industry is facing a record number of contract disputes. The International Cotton Association has received 168 requests for arbitration this year. That is the most since the industry's self regulator starting keeping track in 2000.

This year, it is mostly mills and other buyers backing out, industry officials and traders say. They bought when cotton was as pricey as $2.1515 a pound, the record hit in March. On Monday, cotton for December delivery rose 0.9% to close at 97.94 cents a pound on ICE Futures U.S.

Shrugging off those contractual obligations has made cotton prices jumpy. Having backed out of deals struck in the futures market, buyers have gone into the spot, or cash, market to get what they needed to spin thread for T-shirts, underwear and the like. Those reverberations have been felt by clothing makers of all sizes, whose margins were squeezed by the run-up in prices and now have to decide whether they can lower prices ahead of the holiday season.

"Both the textile mills [and] the merchant...have had a great deal of trouble in managing their risk," said Joe Nicosia, chief executive of Allenberg Cotton Co., the cotton arm of French trading house Louis Dreyfus Group, during an industry conference call in July.

When mills don't live up to their end of the deal, cotton merchants, including big, multinational commodity-trading firms, are at times left holding the bag.

Each year, 100,000 to 200,000 cotton contracts are signed, said Terry Townsend, executive director of the International Cotton Advisory Committee, a group that advises cotton-growing nations. For the crop year that ended July 31, about 10% of contracts have been defaulted on, said Mr. Townsend.

Defaults are a fixture in the cotton market.

You mean the buyer and seller didn't agree to shipment of the cotton on the Peerless?

For more (including a snazzy graphic with data), scale the WSJ paywall and read the article. As one commenter wrote: "A deal's a deal until a better deal comes along."